This blog used to be a haven for forex traders and online investors. It will now contain my political views and opinions about the current state of affairs in my country the Philippines from here on. Please feel free to comment on my posts.
Showing posts with label foreign currency trading. Show all posts
Showing posts with label foreign currency trading. Show all posts
For forex traders, stock traders, commodity futures traders, bond traders!
Since Steve Nison came up with his first book "Japanese Candlestick Charting Techniques" in 1991, forex traders stock traders, commodity futures traders all over the world have been awed and mystified by this centuries old charting tool! The ensuing interest for, and the widespread popularity of this trading tool was simply magical. Every Tom, Dick, and Harry dealing with any form of trading was scrambling for whatever available Candlestick tutorials, books, and lessons there are! Practically everyone in the investment industry was mesmerized by the simplicity and the seemingly promising trading results Candlestick will bring to its users!
It is a well accepted fact that the Japanese are regarded as one of the most efficient money managers and smartest trading partners in the world. The introduction/revelation of their purportedly 'secret' trading tools to the rest of the world would naturally lend an air of mysticism to the event!
But everyone wonders if the Japanese Candlestick Charting Technique is really a well-kept secret intentionally hidden from the rest of the world for centuries!?....Until, Steve Nison accidentally discovered it in the '90's!?
My answer is a categorical no! No, the Japanese Candlestick Chart was not a well-kept secret! Let us start uncovering the truth behind the mysteries and mysticism that shrouds Candlesticks by looking back at Japan's history.
“E” is For Ego – The Biggest Stumbling Block of Most Forex Traders
Making money on online Forex Trading is actually easy! It is only the forex traders themselves who makes it rather difficult and complicated to win trades.
Consider this!
To make money trading the foreign exchange market, there are only 5 basic and simple rules to follow! All of which are quite easy to understand.
One needs only to:
1. Buy low, sell high.
2. Let profits run, cut losses quickly.
3. Add to a winning position, never to a losing one.
4. Go with the trend. (Don’t buck it!)
However, simple though, the above rules may seem to many, most forex traders I’ve known still continue to lose money on forex!
Instead of buying low and selling high, many forex traders find themselves buying high and selling low instead! In fact, a lot of them jump into the market for the wrong reasons.
The dollar fell to a 14-year low of 84.81 yen on Friday last week. The market continued to extend declines to fresh multi-year lows since breaking below the recent 2008/2009 matched trend lows at 87.15. There is technically no real support now until 79.75 which represents the 1995 historic lows, and a retest of this level can not be ruled out at this point with the overriding trend so intensely bearish .However, daily charts are indicating a possible correction from oversold territories, and the shorter-term risks seems to favor additional upside back towards the 88.50-89.00 area before considering the possibility for another round of weakness below the recent 84.80 trend low. On top of that, after the dollar's decline to 84.81 level last Friday, Japanese officials mentioned intervention as a possibility in order to weaken the yen. This temporarily put a plug on further dollar declines against the yen. But this week's action - plans to offer about 10 trillion yen ($115.8 billion) in short-term loans to commercial banks to boost liquidity and maintaining the key interest rate at 0.1 percent - could help weaken the yen without resorting to selling the currency, analysts said.
U.S. non-farm payrolls are will be released today, Friday, December 4, 2009. It is expected to contract to125K in November, which would be the smallest decline since March 2008, while the annual rate of employment is forecasted to hold at the 26-year high of 10.2%. From the data, investors will definitely weigh the prospects for a sustainable recovery.
In anticipation of this Friday's data, we have seen a rise in risk aversion yesterday which drove the dollar higher as it continues to benefit from safe-haven flows.
Trading this Friday's data actually favors a bearish outlook for the greenback as economists anticipate the labor market to weaken further however, price action following an enhanced employment report could set the stage for a long dollar trade.
Online brokers may be categorized into "Market Makers", "ECN" or Electronics Communication Network Brokers, or "NDD" or No Dealing Desk Brokers. For a neophyte trader, it will be hard to distinguish one from the other. Besides, very few of these online brokers describe their services in detail and more often than not, they make themselves appear as if they are all market makers.
What is a market maker?
A market maker provides pricing and liquidity for a particular currency pair and stands ready to buy or sell that currency at the quoted price. The market maker has the volume and the liquidity to take the opposite side of your trade. He has the option of either holding that position or partially or fully offsetting it with other market participants, managing their aggregate exposure to their clients.
Each market maker has a "dealing desk," which is the traditional method that most banks and financial institutions use. Market makers provide two-way pricing to customers throughout the day. These prices sometimes are quoted on a "fixed" basis, meaning that they do not move throughout the day, while other firms use a dynamic spread system, which means the prices change as the liquidity in certain pairs change. The market maker interacts with other market makers banks to manage their global FX positions/risk. Each market maker offers a slightly different price in a particular currency pair based on their global FX book. Banks, investments banks, broker/dealers, and FCMs make up the majority of this category. Market makers are compensated by their ability to manage their global FX risk. This may include spread revenue, netting revenue, and revenue on swaps and conversions of residual profits or losses.
A market maker may choose to keep the trader's position without offsetting it in the market. This will mean that the trader's profit is the market maker's loss and vice versa, and may lead to a possible conflict of interest between the trader and his market maker. A market maker earns their commission from the spread between the bid and offer price and because of this, the trader may at times be at the mercy of the market maker who has the power to increase the spread to minimize his own loss or shave off profits from the traders' position.
What is an NDD broker?
A no-dealing desk broker does not have a dealing desk but instead uses external liquidity providers to provide pricing and liquidity for its clients. The liquidity providers may include banks and other brokers they have networked with. Usually, they have their own proprietary trading platforms which connect to participating banks and brokers (liquidity providers) in their own network. The liquidity providers send in competing bids and offers into the platform, resulting in the best bid and offer being displayed to the client. A no-dealing desk broker may increase the spread to earn its commission.
An NDD broker acts as a conduit between a customer and a market maker. The broker sends the customer's order to another party to be executed by the dealing desk of the market maker. The spreads that the customer receives are dependant on the market maker or dealer that the broker routes the customer's transactions through, and either a fixed or dynamic system can be used. Brokers generally charge fees for this service and/or are compensated by the market maker for the transactions that they route to the market maker/dealing desk.
What is an ECN broker?
A Forex ECN broker does not have a dealing desk but instead provides a subscription to a trading platform where multiple market makers, banks and traders can enter in competing bids and offers into the platform either inside or outside the spread, allowing traders to be market makers and have their trades filled by multiple liquidity providers. A trader might have their buy order filled by liquidity provider "A", and close the same order against liquidity provider "B", or have their trade matched internally by the bid or offer of another trader. The best bid and offer is displayed to the trader along with the market book depth and combined available volume at each price. The ECN broker has a wider base of marketplace participants providing pricing which results to smaller spreads. An ECN earns by charging a small fee for each transaction. The ECN is not responsible for execution, only the transmission of the order to the dealing desk from which the price was taken. In this system, spreads are determined by the difference between the best bid and the best offer at a particular point in time on the ECN. In this model, the ECN is compensated by fees charged to the customer plus a "kick-back" or "rebate" from the dealing desk based on the amount of volume or order flow that it is given from the ECN.
Offhand, it will really be hard to distinguish which broker is of what type since practically everyone is electronically linked with each other one way or the other. A market maker may have one or two clients who are NDD brokers who in turn provide services to other ECN brokers.
What we need to distinguish is who is a legitimate broker and who is not? On this matter, it is always important to know if the broker you are dealing with is regulated by an acceptable regulatory body. By an acceptable regulatory body, it must be one which is internationally recognized and not just a made up regulatory organization from some obscure country.
As part of Samurai Daddy's commitment to help weed out the scammers among the lot of online brokers, this blog will be regularly featuring its choice of online forex brokers.
Samurai Daddy's First Five Choice of Online Brokers
Yup! Call me' Samurai Daddy' from now on as I give you daily updates on my forex outlook based on the Japanese Candlestick charts.Samurai Daddy will be your daily trading companion and I will share with you my insights, opinions, and trading strategies (free o charge). For those, who wants personalized trading advice, or wants my help to get out of nasty trading situations, please feel free to use the yahoo messenger at the side bar of this blog. Don't worry, the exchange of instant messages are visible only to the user and me so much unlike the other online chatting platforms. So, you can discuss trading issues with Samurai Daddy confidentialy using Yahoo Messenger. I will look forward to having confidential chats wth you soon. Just catch me online!
Here now is my latest update:
The monthly candlestick chart has so far maintained its dollar-bullish bias. The 'Bullish Ladder Bottom' reversal pattern is turning out true to form for the USDJPY with the February Candle emerging out to be the confirmation candle.
The daily USDJPY candlestick chart is also reflecting this bullish bias. So far, the price has remained above the 93.55 level which is our reference point to confirm the reversal pattern. USDJPY just have to close at or above this level by the end of February to maintain a dolar-bullish outlook. USDJPY is set to test the 95.46 level which is the next consolidation area and a breakof this warrants a test of the 97.00 area and on to its ultimate reversal objective of 99.86. Current fundamentals are favoring this scenario.
Even the EURUSD monthly candlestick is showing a slight bullish-dollar outlook wth the January candle forming a bearish dark cloud cover by the January, 2009 candle which significantly breached the midpoint of the December, 2008 upward candle. EURUSD is consolidating at the current levels but has not shown any attempt to pull down the dollar once more. Samurai Daddy still favors a dollar bullish bias with a break of the 1.27 level paving the way for are-test of 1.20.
The USDCHF monthly candlestick chart is also confirming the market's slightly dollar-bullish bias. The January candle has formed a bullish piercing pattern and the February candle needs to confirm this. USDCHF may enter a consolidation phase though, as the GBPUSD current levels may stall further declines of the European currencies. GBP has continually declined against the dollar since August, 2008. It seems to have reached equilibrium at the current levels and in the process has stalled the dollar's rise against the Euro and CHF. The market is looking for fresh fundamentals to push the dollar higher against the European currencies.
Over-all, however, Samurai Daddy maintains a strong dollar bullish outlook, specially for the Japanese Yen which I am expecting to knock at the 100.00 level in the near term.
Since Steve Nison came up with his first book "Japanese Candlestick Charting Techniques" in 1991, forex traders stock traders, commodity futures traders all over the world have been awed and mystified by this centuries old charting tool! The ensuing interest for, and the widespread popularity of this trading tool was simply magical. Every Tom, Dick, and Harry dealing with any form of trading was scrambling for whatever available Candlestick tutorials, books, and lessons there are! Practically everyone in the investment industry was mesmerized by the simplicity and the seemingly promising trading results Candlestick will bring to its users!
It is a well accepted fact that the Japanese are regarded as one of the most efficient money managers and smartest trading partners in the world. The introduction/revelation of their purportedly 'secret' trading tools to the rest of the world would naturally lend an air of mysticism to the event!
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